Falcon Receives Reserves Estimate for Mako Trough Project in Hungary

Falcon Oil and Gas has received a new independent report disclosing a resource estimate of the Mako Trough Pannonian Basin Gas Accumulation, Falcon's deep gas exploration project in southeastern Hungary.

The Scotia Report is compliant with National Instrument 51-101 "Standards of Disclosure for Oil and Gas Activities" ("NI 51-101").

The Scotia Groupof Dallas, Texas was commissioned by Falcon to independently describe and quantify the resource of the Mako Trough using all data available as of an effective date of August 15, 2006. The Scotia Group report is limited to an estimation of the possible range of hydrocarbon volume that theoretically may be produced and does not include any economic modeling or valuation of the resources. The Scotia Report focuses on Basin Centered Gas Accumulation ("BCGA") unconventional resources, and does not address any oil or gas resources that may occur in associated conventional or unconventional reservoirs outside of the BCGA. The Scotia Report on the resource of the Mako Trough describes a probabilistic distribution of the potentially recoverable portion of "Contingent Resources" as defined by the Canadian Oil and Gas Evaluation Handbook (COGEH) and does not represent an estimate of reserves.

Based on all available data, the Scotia Group has assigned the following probabilistic estimation of potentially recoverable Contingent Resources to the Falcon interests in the Szolnok formation, the Lower Endrod, the Basal Conglomerate and the Synrift Sequence. The Scotia Report measures the Mako Trough in trillions of cubic feet (Tcf):


                                       Probability Greater Than
                                     P90 (90%)     P50 (50%)     P10 (10%)
    Contingent Resource(1)(2) -
    (estimated recoverable           21.8 Tcf      54.9 Tcf      116.1 Tcf

The resource estimate has been conducted using the definitions specified by the Canadian Oil and Gas Evaluation Handbook. The Mako Trough Resource falls under the "Discovered Resources" classification. The values refer to the probabilistically estimated recoverable fraction of "Contingent Resources" within that classification. Contingent resources are those quantities of oil and gas estimated on a given date to be potentially recoverable from known accumulations but are not currently economic. The economic nature of this resource has not yet been assessed due to the early stage of data gathering for the Mako Trough resource. The recoverable portion of this "Contingent Resource" is contingent upon the demonstration of productive capability of the various zones of interest through well testing and longer term production testing which has not occurred as of the effective date of the report.

Estimates are as at August 15, 2006, the effective date of the Scotia Report.

"The Scotia Group is an international oil and gas advisory service organization that has significant expertise and experience in evaluating unconventional gas resources throughout the world, including recent studies assessing unconventional gas resources for a major, multi-national exploration and production company," said Marc A. Bruner, Chairman and CEO of Falcon Oil & Gas Ltd. "We are pleased to have their expert assessment of resources located in the Mako Trough."


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